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6 Hidden ERP Accounting Software Licensing Costs

Today’s small and medium businesses have a wide selection of high-powered enterprise resource planning solutions (ERP) that allow them to manage data across financials, manufacturing, inventory, shipping, and other aspects of the business.  Some vendors offer self-hosted solutions while others provide a cloud-based model.

Whichever platform suits your situation, most likely, the price you’re seeing on the product website or what’s being peddled to you is not the final cost. It doesn’t matter whether the difference is between ERP or accounting software. Here are seven hidden costs that can easily pad the published price of most ERPs.

6 Hidden ERP Licensing Costs

1. System licensing

Published pricing often refers to a limited promotion or the basic package of the ERP. This is often the standard accounting module. You are likely to be charged extra fees for additional modules, which, ironically, are what attracted you to the ERP in the first place. So if you’re getting a complete ERP suite expect to shell out more money.

2. User licensing

How many in your staff will be using the ERP system? Many vendors charge by user license, that is, there’s a fee for every person using the system. The published price may just refer to a single user (it is often the case), so you better read the fine print regarding user license. If you have a pool of ERP users in your organization, it is often cost-effective to get a multiple license, which costs more, than buying a cheaper single-user license but multiple times.

3. Database licensing

ERP solutions work best because you can integrate and create an insight from different sets of data from different systems of your business operation. To do that, you need lots of databases to process the information.  Some vendors charge per database license; ergo, the more wide-reaching your datasets are—for example, inventory, manufacturing, human resources, and payment have different databases—the higher your total cost.

4. Remote access license

Mobile accounting is the toast of today’s ERP solutions. Imagine your sales and inventory teams can interact on-location and real-time, thanks to smartphones that can access your on-premise or cloud ERP via Internet or intranet (the company’s private network). But, often, vendors charge an add-on fee for remote access. Again, read the fine print even if you see mobile access is included in the product’s promotional materials.

5. Support license

Some vendors, especially the big ones, have created another revenue channel for themselves by charging extra fees for support. Normally, you’ll be given a limited period of “free” technical support (e.g., three months), but after that, you’ll be charged with a per month subscription fee. In fact, you’ll be offered a new set of subscription plans just for support! Paid support can include basic customer support and learning tools and solutions, which, in some cases, benefit small and medium businesses without an in-house technical team. It’s like outsourcing your I.T. staff to these providers. Just make sure the paid subscription support has enough inclusions to justify the cost.

Read more:  Cloud Accounting Software Today: Top Cheap And Popular Choices For Small Business

6. Upgrade licensing

Be wary also of what kind of licensing you are buying. Does it include system upgrades? In some instances, you might end up paying for another license once a new ERP upgrade comes out. Worse, some vendors use a bait-and-switch tactic, where they hide the need to upgrade the ERP on a regular basis for a fee.  You end up paying for additional fees just to keep your ERP running properly!

CONCLUSION

Buying an ERP solution is like booking for a budget airfare. Yes, the upfront cost is attractive, but once you get down to the nitty-gritty of the fine print, you realize that as much as half of the total cost is hidden. And in most instances, these costs are projected through all sorts of licensing requirements just to squeeze out more dollars from you. Buyer beware. Now that you know the hidden costs, here’s how to maximize the potential of your accounting software.

Category: Accounting Software

2 Comments »

  • Avatar DizzyQ says:

    This makes me have second thoughts about purchasing an accounting software program. What is your position on getting a free accounting software program instead?

    • Avatar David says:

      I wrote this post not to scare anyone from buying a full-version accounting software which might actually provide good services to your company, but just to make people aware that there might be hidden costs that are not usually part of the advertising or sales pitch of the software company. The idea I am hammering out: research, research, research. It always pays to do some research not only the features of an accounting solution but also its hidden costs. After all, getting a software program is an investment for your business.

      Having said that, there are a number of good free accounting software programs that you can use (or try out before you buy a paid accounting software program that has all the features you need). A caveat: While there are good software programs, not all can provide the functionalities or features you need for your business which you might get from a paid one. Many of today’s free accounting software programs offer limited or trial versions of their paid versions, or clipped functionalities

      Some free programs include TurboCASH 5, GnuCash, and NCH Express Invoice. Feel free to try them out.

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